Comprehensive Pre-exam (Part II)
E has a $10,000 traditional whole life policy with a $4,000 cash value. Premiums paid to date are $3,500. If the policy lapses with a $4,000 loan outstanding, what amount will be taxable as income to E?
$500
Premiums are base on what 3 values?
1) Expected Mortality 2) Interest 3) Expenses
Nonforfeiture Options
1) Reduced Paid-Up 2) Extended Term 3) Cash Surrender
Which of the following life insurance policies does not develop a cash value?
5 year term ==> (Term insurance is temporary, therefore it does not develop a cash value)
Which of the following is NOT correct concerning licensing and authority for viatical settlement licensees?
A business entity may not be licensed as a viatical settlement provider
Option that will keep a loan from lapsing?
Automatic Premium Loan
All of the following are Nonforfeiture Options, EXCEPT:
Automatic Premium Loan Option
The Nonforfeiture Option that , IF exercised, terminates all coverage is:
Cash Surrender
Any withdrawal in excess of the Cost-Basis will be taxed as ordinary income:
Cost Recovery Rule
All of the following are Dividend Option, EXCEPT:
Extended Term ==> (Extended Term is a Nonforfeiture Option, not a dividend option)
Statement that DO NOT affect the acceptance or rating of the risk.
Immaterial
An __________ report is a general report of the applicant's finances, character, morals, work, hobbies and other habits.
Inspection
Interest earned on premiums paid to an insurer helps to _________ the premiums charged.
Lower
Primarily used to collect adverse medical information about an applicant's health and act as an information exchange.
MIB (Medical Information Bureau) Report
Statements that impact the acceptance of an insurable risk are:
Material
A FALSE statement contained in the application is considered a:
Misrepresentation (A Material Misrepresentation may void the policy)
All of the following are classes of insurance requiring a producer's license, EXCEPT:
Mutual Farm
This Option may go into effect AFTER a policy lapses:
Nonforfeiture Option
__________ in a policy allow the owner to name the beneficiary, choose a dividend option or settlement option, or borrow against the contract.
Ownership Provision
All of the following are Settlement Options, Except:
Reduced Paid-Up ==> (Reduced Paid-Up is a Nonforfeiture Option, not a Settlement Option)
Which is TRUE regarding the taxation of the cash value in a Universal Life Policy prior to withdrawal?
Tax Deferred
Which of the following statements about policy roles is true?
The insured and the policy owner are usually the same, but not necessarily.
All of the following are TRUE regarding a Waiver of Premium Rider, EXCEPT:
The insured must repay the unpaid premiums
If the cash value of a Permanent Life policy equals the face amount, what is that referred to?
The policy's endowment
Which statement regarding Social Security benefits is FALSE?
Widows and Widowers CANNOT receive survivor's benefits before age 62
An applicant claims they have no hazardous hobbies, but the agent sees a plaque proclaiming the applicant as president of a local skydiving club. The agent would need to include this information on the:
Agent's Report
Cash withdrawals from a life insurance policy are taxed based on_______?
FIFO (First In First Out)
If the policy owner specified the time over which all settlement option installments are to be paid, he/she has chosen which Settlement Option?
Fixed Period
Which Settlement Option pays for a specific period, regardless of who may receive the payments?
Fixed Period Option
A Single Premium Immediate Annuity (SPIA) begins paying out its benefit:
No later than within 1 year
For an individually purchased life insurance policy, the premiums are considered a ___________________?
Nondeductible Personal Expense
K needs funds and needs to maintain the life insurance she has at the same time. Which of the following should K do with her traditional whole life policy?
Take out a loan
A Universal Life policy has a death benefit of $125,000 and a cash accumulation value of $15,000. Generally, what will happen to the policy if there is a $5,000 partial withdrawal?
The death benefit or cash accumulation will be reduced by the partial withdrawal.
Statements made by the applicant, on the application, that are GUARANTEED to be TRUE:
Warranties
Paul is the insured and policy owner. Paul named Danny and Kayla as co-primary beneficiaries of Paul's $100,000 policy. Danny is to receive 70% and Kayla 30%, therefore Danny gets _______ and Kayla gets ______ when Paul dies.
$70,000/$30,000
Dividend Options
1) Cash 2) Premium Reduction 3) Accumulate at Interest 4) Paid-Up Additions 5) 1 Year Term 6) Paid-Up Option
The widow or widower's Social Security Blackout period lasts until a surviving, non-remarried spouse reaches age ______?
60
All of the following are true in general about riders, EXCEPT:
All riders are provided for as long as the policy is in effect
Which of the following is a TRUE characteristic of a Variable Universal Life Policy?
As long as there is sufficient cash value to cover policy expenses when due, the insured is not required to pay the planned premium.
An insurer must provide a Policy Summary:
Before or at the time of policy delivery
The Primary benefit of Universal Life is the potential of a ____________ than the fixed rate in Whole Life policies?
Higher interest crediting rating
Statement made on the application by the applicant that are believed to be true to the best of the applicant's knowledge are called:
Representation
Which of the following is not a factor in premium determination?
Reserves
How is a Variable Universal Life (VUL)insurance policy different from a Universal Life (UL) insurance policy?
The ability to invest the cash values in various separate accounts.
Social Security Retirement Benefits are available as early as age ____ but are less than if paid at the full retirement age.
62
Which provision allows an insurer to borrow from the cash value of a policy in order to pay premiums due and prevent a lapse in coverage?
Automatic Premium Loan (Can be Cancelled at any time)
